Napa supervisors direct staff on possible bump to housing impact fees, ask for narrower exemptions and escalator

NAPA, Calif. — Napa County staff presented updated nexus and feasibility studies on residential and commercial development impact fees on Sept. 23, saying the technical work supports much larger maximum fees than the county currently charges but that those maximums would likely undermine development feasibility in many cases.

The Board of Supervisors directed staff to return Oct. 21 with a resolution for public hearing and to bring fees into effect on a later date if the board adopts them, and they signaled consensus on using the California Construction Cost Index as an annual escalator. Supervisors also asked staff to consider targeted exemptions and incentives for small homes and accessory dwelling units and to revisit fee levels if a regional or local housing bond passes.

Why it matters: The county has not updated its affordable-housing and commercial-linkage fees since 2010 and 2014. Staff said current fees are recovering only a small fraction of the funding the county says is justified by the growth it permits. The studies estimate theoretical “maximum justified” fees by measuring how new development increases demand for subsidized affordable housing. But the feasibility analysis shows many of those maximum levels would make projects unprofitable and therefore unlikely to be built.

What staff presented Becky Craig (staff member) framed the consultants’ work and said water and sewer connection fee work is postponed; Jennifer Palmer, director of Housing and Community Services, summarized the affordable housing portfolio’s long record and current fee structure. Palmer said the county’s present residential fees (adopted in 2010) and commercial fees (2014) generate roughly $2.5 million a year, mostly from residential development.

Jennifer Palmer, Director of Housing and Community Services: “The nexus study sets the maximum justified fee. The board has the opportunity to set fees up to the maximum. However, fees can be set at less than the maximum, understanding that there are reasons to do that…developers have choices where to locate and a jurisdiction will choose to remain competitive.”

Consultants from Willdan Financial presented two linked reports: an April “nexus” study that calculates maximum justified fees and a September “feasibility” analysis that models how much of that fee could be added to a project before it becomes unprofitable. The consultants told the board the studies use two accepted approaches: residual land value (the industry-preferred method) and a total-development-cost method (often used for owner-operated industrial uses and warehouses).

Key numbers presented - Consultants’ illustrative maxima (examples from the study): about $152 per square foot for new rental multifamily buildings, $86 per square foot as a theoretical maximum for new for-sale housing, $584 per square foot for new restaurants and $405 per square foot for hotels (these are technical maxima from the nexus study, not staff recommendations). - Staff noted current county residential fees are on the order of $9 to $12 per square foot by tier; commercial fees are presently in the low $20s per square foot.

Staff recommendation and board direction Palmer and Craig recommended the board use the feasibility study to select fee levels substantially below the study’s maxima, paired with the Construction Cost Index (CCI) as an annual escalator so fees do not erode with inflation. Their staff package included a range of suggested fee outcomes that the board could adopt or modify.

During discussion, supervisors emphasized different policy goals: some members said higher fees should be used to discourage very large single-family homes in the unincorporated county and to free up local matching funds for affordable housing in cities; others pressed for targeted incentives to get starter homes and ADUs built. The board asked staff to: - Return Oct. 21 with a formal resolution, public notices and a recommended effective date (staff proposed Jan. 2 to give permitting staff time to implement changes). - Include the CCI as the escalator if the board adopts new fees. - Consider fee exemptions or reductions to encourage smaller main units and ADUs (the board discussed exempting small primary houses and ADUs from fees; state law already precludes charging fees for many very small ADUs). - Provide additional analysis about how developers might be incentivized to build actual affordable units rather than pay in-lieu fees, and whether fees could be staged or paid at certificate of occupancy for some commercial uses such as hotels.

Public comment and industry response Howard Siegel and Chuck Shendeman of the Napa Housing Coalition urged higher fees and supported the CCI escalator. Industry representatives, including Michelle Benvenuto of “Weingers of Napa County,” supported using the studies to strike a balance between fees that generate meaningful local funding and fees that preserve commercial competitiveness.

Developer and feasibility concerns One speaker who identified himself as a former real-estate developer warned that increasing fees will ultimately be passed to buyers or could make small projects infeasible. He urged that fees be charged only on newly created lots, not on longstanding lots where a homeowner later builds.

Next steps Staff will: publish the required public-notice materials and return Oct. 21 with a draft resolution and recommended fee schedule based on the board’s direction. Palmer said staff will also track possible regional housing bond measures and return to the board for reconsideration if a major bond passes and changes local match requirements.

Provenance (transcript evidence) The board’s discussion began with staff’s presentation (transcript: item labeled “development impact fee nexus studies” and the presentation between roughly 01:09:22 and 02:00:00 in the meeting recording) and continued through public comment and board directions (transcript passages show the presentation and subsequent Q&A).